NORMATIVE IMPLICATIONS OF EQUILIBRIUM-MODELS - HOMOGENEOUS EXPECTATIONS AND OTHER ARTIFICIALITIES

A new round in an ongoing discussion about the usefulness and validity of the Capital Asset Pricing Model (CAPM) began with an academic pape r by Fama and French. The tumult is not just the result of opposing id eas, but is also about conflicting professional and economic interests . The disagreements often obscured by academic rhetoric, are really ab out normative applications of positive theories in general, and about the normative implications of equilibrium-restricted beta statistics i n particular. The purpose of this paper is to show where the line of d emarcation between positive and normative issues should be drawn in th is debate.